The Director General of Foreign Trade (DGFT) slipped in a small modification in the 1999-2000 Export and Import Policy on Thursday, making imported steel scraps and defective steel items eligible for a penal duty beyond the notified cut-off price. The basic customs duty on prime material of similar items ranges from 25 per cent to 30 per cent (not counting add-ons like the special import duties and the countervailing duty.)

The items in the DGFT list are hot-rolled coils, hot-rolled sheets, cold-rolled sheets, tinplates, electrical sheets, plates and alloy steel bars and rods that have been hot rolled in coils. The striking element of the amendment in the handbook of procedures is that the floor price for almost all steel rejects is the prevailing landed cost of prime material.

The floor price for defective hot-rolled coils, for instance, is $232 a tonne, which is roughly the current price at which prime grades of hot rolled coils are being imported. The union commerce ministry has obviously paid heed to industry allegations that the customs duty exemption for `seconds' and `defectives' was being taken advantage of, to import prime grades of steel.

Defective hot rolled coils will attract a duty if imported at a CIF value of less than $232 a tonne, which as we have pointed out already, is the going price of imported prime material. The continued downtrend in steel prices at home and abroad have brought down the price of hot rolled coils to close to $230 a tonne from $355 a tonne in 1995-96.

Second-grade hot-rolled sheets will attract a customs duty, if imported at a CIF value of less than $243 a tonne. Cold rolled coils wastes will attract a duty, if imported at less than $299 a tonne. Tinplate waste can be freely imported at a c.i.f. rate less than $545 a tonne.

The floor price for importing defective plates is $311 CIF and the minimum rate at which alloy steel bars and rod (hot rolled in coils) will be allowed a free entry into the country is $ 560 a tonne CIF.

Many of the seven products that can be ``imported free'' below the ``value specified'' by the DGFT are items for which steel producers at home have been demanding anti-dumping duties. The working group on steel, set up by the finance minister in October, had pointed out that the imports of seconds and defectives had shot up to 4.1 lakh tonne last year, from 3.2 lakh tonne in 1995-96.

The working group on steel, headed by special secretary, banking, C. M. Vasudev, had incidentally, suggested ``fixation of tariff value'' for the prime grades of almost all the products in the DGFT list, like HR coils, CR coils, electrical sheets and tinplates, to ``deal with the dumping of these items.''

The commerce ministry is known to have opposed the ``trigger price'' system, on the grounds that it was not in keeping with norms set by the World Trade Organisation (WTO). Hot rolled steel producers were thrown a scrap, in the form of an anti-dumping duty on similar material coming from some CIS countries.

The industry wailed that in the meantime, hot rolled steel was entering the Indian market at similar prices (to those offered by CIS producers) from South East Asia and other parts of the world. Sources in government rule out the possibility of a floor price for importing prime grades of steel.

A small concession has been made, however, by fixing floor rates for ``wastes'' and ``scraps.'' The Centre has in the recent past, also announced an anti-dumping duty on hot rolled products imported from some CIS countries and duty concessions for some imported raw materials.